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Cleaning Giant Ecolab Hikes Dividend, Hits New Highs
12/12/2012 5:40:00 PM
By: Investor's Business Daily
Ecolab ( ECL ) has two good things going for it, if you're an IBD-style investor seeking a dividend stock.
The giant provider of cleaning-related products and services has hiked its dividend, and it's also been showing mostly encouraging chart action.
The St. Paul, Minn.-based company declared on Dec. 6 that it's raising its quarterly dividend by 15% to 23 cents a share. That results in an annual dividend of 92 cents, yielding about 1.3%.
"This cash dividend increase reflects our accomplishments this year and our confidence in our future," CEO Douglas Baker Jr. said in a news release.
The release also noted that Ecolab has paid cash dividends on its common stock for 76 straight years, and the latest increase represents Ecolab's 21st consecutive annual dividend hike.
A yield of 1.3% isn't that impressive, but IBD has long argued that it's not all about yield.
Consider what William J. O'Neil, IBD's founder and chairman, once wrote: "If you do buy income stocks, never strain to buy the highest dividend yield available. That will typically entail much greater risk and lower quality. Trying to get an extra 2% or 3% yield can significantly expose your capital to larger losses."
In terms of chart action, Ecolab broke out from a flat base with a 69.06 buy point in October and has been hitting new highs. It now stands 2% beyond 69.06.
On the downside, the stock showed weakness Wednesday, falling 3% in big turnover. The move comes as Ecolab takes on $500 million in new debt this week to finance its Champion Technologies acquisition.
Ecolab, No. 17 in Tuesday's IBD Big Cap 20 lineup, has been making acquisitions in an effort to better position itself for the future. Its recent buys have included Nalco, which offers water-treatment services, and Champion, a specialty chemicals firm serving the energy sector.
Analysts at Credit Suisse wrote last week that the Champion deal "makes sense financially and strategically and provides ECL with additional scale technologies to take advantage of the growing opportunities in the unconventional oil-gas exploration market."